/ Money

Let’s shatter the myth of ‘free’ banking

Some of the banks have suggested that the way to avoid future banking scandals is to let them charge for current accounts. It’s time to shatter the myth of ‘free’ banking.

Our latest research has found that some current account holders are paying as much as £900 in bank charges.

£900 in charges? Yes, charges for going overdrawn for two days per month without permission range from £120 to £900 a year. Yorkshire/Clydesdale Bank’s Current Account Plus will charge £75 a month on this basis, or £900 per year. The cheapest unauthorised overdraft, Halifax’s Reward Current Account, charges £5 a day (£120 a year).

Even if you have an authorised overdraft, there are still high annual percentage rates to fear when you go into the red. If you use your authorised £200 overdraft with your First Trust classic account six days a month, you’d be charged £185 a year.

All of this adds up to a hell of a lot of money. And it’s not just a few people paying these fees. Our survey of current account holders found that six in ten have paid a bank charge that they thought was unfair, hidden or disproportionate.

In fact, consumers are paying over £9bn a year in fees and lost interest. Clearly, banking isn’t free, so why are banks saying we should pay more for our accounts to avoid future crises?

Change the culture and practices of banks

Consumers shouldn’t be footing the bill when the banks have let us down so badly. In fact, we think that any agreement by the banks to start imposing a monthly fee (suggested even by the FSA) would breach Competition Law. This also alludes to collusion, which would prompt us to call for strict penalties against banks that get together to fix fees.

To suggest that banks increase charges to avoid more scandals defies logic and is nothing more than a slap in the face for consumers who are being hit hard by one of the worst financial crises in recent history. It’s even more ridiculous when you consider that consumers bailed out banks in the first place.

So let’s put a lid on the myth of ‘free’ banking. Instead there needs to be a fundamental change to the culture and practices of the banks, including greater transparency about the true cost of banking. Ultimately, the current parliamentary banking inquiry needs to put you and me, the consumer, first.


The one bank charge I would like to see is for paper-based transactions, especially cheques. As someone who conducts his banking electronically, I’m fed up with subsidising free paper-based transactions for other customers. I’m also fed up with people who owe me money giving me cheques, which is unduly onerous upon me, and those who I owe money insisting on a cheque instead of giving their sort code and account number. I would like to see the banks charge £1 for every cheque written and separately £1 for every cheque deposited. If the recipient has a sort code and account number, there is no reason that a bank transfer cannot be used instead of a cheque. Bank transfers can be instructed online, via telephone banking or in a branch.

Dave D says:
21 August 2012

There’s a great many reasons, mostly outlined on the previous Which? convo’s about this issue, but significantly including people needing to TRUST whoever they give their details to. If someone is paying you for the first time and doesn’t yet know you, how do you propose that they should know if they can trust you?

However, far more to the point is that fact that whilst On Line banking is (as far as I know) free to use, the millions of Debit Card transactions cost more than the cheques do, and all customers, including those who never ever use a debit card (regardless of whether they use cheques or not) are being fleeced for those fees.


I felt I needed to respond to the rather pompous first comment. Although cheques might be difficult from a business point of view,many older people do not have access to a computer.This can be because of income level or because they are not comfortable using a computer. There is already far to much prejudice in society against older people and they do not need to be penalised further. As mentioned by the WHICH campaign,I doubt if any bank is currently losing out financially. The main problem with banks is the risk they took with everyone’ s money which caused the crash. Why should the public rectify this? Banks have mainly escaped the effects of their behaviour which have caused misery to thousands of people.


Dave beat me to it, but the need for cheques has been discussed at great length on Which? Conversation. If you don’t like taking cheques, nfh, I suggest you give a discount for your preferred method(s) of payment.

As many have pointed out, cheques are important for charities. Yesterday, I was given a cheque for £150 for the charity I work for. I’m glad it was not cash, and in the circumstances, there were no other alternatives. I don’t pay by cheque if there is an alternative.

We could make a charge for paying by cheque (as with postal orders) but once again, charities could lose out.

I suggest you get involved with a small charity that attends events all over the place and you will soon realise the importance of cheques. It’s not just charities that need cheques to remain.


Dave D, why should anyone need to trust someone to give them their sort code and account number, which are used for receiving money? I am not, for example, suggesting that anyone gives out their debit card number or online banking login, which are used for paying money. Also, debit card transactions do not cost more than cheques. Paper-based transactions are inherently more costly for the banks than electronic transactions, and this is reflected in their charges to businesses.

Paganlady, as I have already pointed out, online banking is not the only way to instruct a bank transfer, so I don’t understand why you are focussing on this particular method alone.

Wavechange, I don’t understand your comment “If you don’t like taking cheques, I suggest you give a discount for your preferred method(s) of payment“. If as a consumer I buy faulty goods online and return them for a refund, why should I give a discount to the trader for refunding me other than by cheque? If the refund is for a small amount like £10, it is disproportionately onerous for me to make a special trip to the bank or post office to deposit the cheque. Very often business who owe me money send me a cheque against my wishes, which wastes my time; I would like to see bank charges that discourage this annoying practice. Also charities have sort codes and account numbers, so they can receive bank transfers in the same way they can receive cheques.

Cheques are redundant and nobody has given a convincing reason why they should continue to be provided free of charge. This is proven by the fact that other countries manage fine without them, using bank transfers instead.

Dave D says:
21 August 2012


If you need anyone to explain to you why it is necessary for one to trust anyone to whom one gives one’s account number and sort code then:

a) you are not heeding the security advice of all British Banks
b) you are at great risk of being the subject of identity theft or fraud yourself and
c) you are not really in a position to advise others on secure methods of payment.

I respectfully suggest that you look into a) and b) above for yourself before you loose everything!



The charity I belong to does use electronic transfer and it was me who pushed for this to happen.

Unfortunately that does not work well if the transaction takes place in a gazebo at a village fete, in a church hall or on a boat. Please try to see that your solution does not suit everyone. Carrying around a lot of cash is asking for trouble.


Well said Wavechange – the last thing we want is more charities signing us up for direct debits on the high street [or our doorsteps even] Sorry! Off topic . . . different Conversation.



To clarify my comment, I suggest that you consider charging less for goods or services if a customer uses your preferred method of payment.


Wavechange, I’m not the business but the consumer. As I said above, if I buy faulty goods online and return them for a refund, why should I give a discount to the trader for refunding me by a means other than by cheque? If the refund is for a small amount like £10, it is disproportionately onerous for me to make a special trip to the bank or post office to deposit the cheque. I’ve think you’ve totally missed the point.


Yes, making a special trip to the bank or post office to deposit £10 wouldn’t make much sense. I would try to combine the journey with something else like a bit of shopping or going to the library or the pub perhaps.


Thanks John. I do agree that we need to watch out for some of the things that some charities get up to.

Can I suggest that discussion of cheques is continued on the relevant Conversation?


Your bank code and account number are of no use to anyone at all other than to pay money into your account. They are on every cheque, if you write them.